Why will real rates remain low for years?
![PJCT-0721-AM-623892-strategic-advisory-summary-700x700-03-hr](https://cdn.jpmorganfunds.com/content/dam/jpm-am-aem/global/en/images/insights/portfolio-insights/PJCT-0721-AM-623892-strategic-advisory-summary-700x700-03-hr.jpg)
There are two reasons we could find ourselves stuck in a low or negative real rate environment:
- A weak post-pandemic recovery
- An extended period of financial repression
How should investors respond?
The bond vigilantes are now outgunned by the bond pacifists, and the real opportunities lie outside of traditional fixed income.
- Securitized credit: commonly offers amortizing cash flows, and relatively short maturities
- Equities: US and Europe can contribute meaningfully to returns
- Real assets: provides stable real yields with potential for cash flow growth during inflationary periods
![PJCT-0721-AM-623892-strategic-advisory-summary-700x700-05-hr](https://cdn.jpmorganfunds.com/content/dam/jpm-am-aem/global/en/images/insights/portfolio-insights/PJCT-0721-AM-623892-strategic-advisory-summary-700x700-05-hr.jpg)
What does this mean for Pensions and Insurers?
![PJCT-0721-AM-623892-strategic-advisory-summary-700x700-04-hr](https://cdn.jpmorganfunds.com/content/dam/jpm-am-aem/global/en/images/insights/portfolio-insights/PJCT-0721-AM-623892-strategic-advisory-summary-700x700-04-hr.jpg)
Significant segments of the global institutional industry are particularly sensitive to low-interest rates, but there are strategies for coping with a low-rate environment.
- Corporate Pensions adopt income-oriented assets, seek credit diversification and increase illiquid assets exposure
- Public Pensions: look for alternative income and illiquidity to boost returns
- Insurance Providers: replace some long duration fixed income and public equity by illiquid alternatives